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13D Filing Blog

lazard's 2018 activist review

1/26/2019

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Snap shot of the executive summary below. See this link for the full deck.
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Cannell Takes 7.3% stake in Hudson global Inc.

1/14/2019

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Activist J. Carlo Cannell has taken a 7.3% stake in Hudson global Inc. 

Activist J. Carlo Cannell has taken a 7.3% stake in Hudson Global Inc. (NASDAQ: HSON) the provider of recruitment process outsourcing and managed services. The company seems to have an attractive value proposition, with a market cap of ~$45m, a cash balance of $39mm and no debt (see exhibit A below from HSON recent investor presentation).
 
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13D Filing Purpose of transaction:

"Cannell Capital LLC, on behalf of the Investment Vehicles, identified the Company as an entity satisfying each of the Investment Vehicle's investment criteria. The Investment Vehicles acquired and continue to hold the Shares as a long-term investment. 

CC reserves the right to discuss various views and opinions with respect to the Company and its business plans with the Company or the members of its senior management. The discussion of such views and opinions may extend from ordinary day-to-day business operations to matters such as nominees for representation on the Company’s board of directors, senior management decisions and extraordinary business transactions. Mr. Cannell reserves the right to take such action as he may deem necessary from time to time to seek to maximize the value of the Shares. Such actions may include, but may not necessarily be limited to, pursuit of strategic initiatives to enhance shareholder value. 

CC may engage in any of the actions specified in Items 4(a) through 4(j) to the Schedule 13D general instructions. 

Except as set forth above, CC has no present plans or proposals that relate to or would result in any of the transactions described in Item 4 of Schedule 13D."


Cannell's purchases were in the $1.43-$1.51 per share range.

The writer DOES at the timing of writing this post have a long position in HSON- the position was taken today after the 13D filing was made. Depending on further research and market conditions the writer may dispose of or acquire more shares in the HSON.


Exhibit A: From HSON Investor Presentation

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Disclaimer:
Information provided here or in email alerts does not constitute investment advice nor an offer to sell securities. The information provided is for research purposely only and we do not take any responsibility for any loss or damage including and without limitation to any loss which may arise directly or indirectly from use of or reliance on such information. The writer of this article does at the time of writing have a long position in HSON, and may potentially purchase or dispose of shares pending further analysis and market conditions. 
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Lawrence Seidman increases stake in small bank

12/31/2018

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Today, Lawrence Seidman, the activist investor who in the past has been characterized as Mr. Potter from It's a Wonderful Life (see this old Forbes article for some background on Mr. Seidman) has increased his stake in Bankwell Financial Group (NASDAQ: BWFG) to 7.29% in the community bank.

Seidman's first 13D filing in BWFG was made earlier this month on Dec 13, 2018. 

Purpose of transaction: "​The Reporting Persons originally purchased the Shares based on the Reporting Persons’ belief that the Shares, when purchased, were undervalued and represented an attractive investment opportunity." 

Siedman also stated that he had been having several conversations and meetings with management. Subsequent to this first 13D filing, on Dec 19th, BWFG announced a 400,000 share buyback program. 

The current stock price of ~$28.65 (mid-day) is just slightly above Siedman's average purchase price (based on latest 13D filing) of $28.15.

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Disclaimer:
Information provided here or in email alerts does not constitute investment advice nor an offer to sell securities. The information provided is for research purposely only and we do not take any responsibility for any loss or damage including and without limitation to any loss which may arise directly or indirectly from use of or reliance on such information. The writer of this article does not at the time of writing have any positions in BWFG, but may potentially purchase shares pending further analysis and market conditions. 
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Silver Lake increases stake in msg to 9.7%

12/26/2018

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Today private equity firm Silver Lake Partners (and its affiliates) filed a 13D disclosing an increased beneficial ownership in The Madison Square Garden Company (NYSE: MSG). 

Silver Lake's first 13D filing disclosing ownership in MSG was made earlier this year in Feb. Based on the SEC filings, Silver Lake's average purchase price has been ~$233 per share.

In the Purpose of Transaction, Silver Lake make reference to MSG's assets being undervalued by the market. Taking a cursory look at MSG's balance sheet looks like there is not too much debt on those hard assets either, if that cursory examination is right this could be an ideal target for a leverage buyout which Silver Lake has experience with. 

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Disclaimer:
Information provided here or in email alerts does not constitute investment advice nor an offer to sell securities. The information provided is for research purposely only and we do not take any responsibility for any loss or damage including and without limitation to any loss which may arise directly or indirectly from use of or reliance on such information. The writer of this article does not at the time of writing have any positions in MSG, but may potentially purchase shares pending further analysis and market conditions. 
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How paul singer made his billions

12/21/2018

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The very aggressive activist investor Paul Singer is one of our favorite investors. Bloomberg does a great overview of his career:
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altAi Capital Sends Letter to Amber Road board

12/17/2018

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Today Altai Capital sent a letter to the board Amber Road (NYSE: AMBR) in which, among other things, Altai expressed its loss of faith in AMBR's Board and management’s commitment to protect shareholder interests and maximize value given AMBR's poor performance, repeated growth projection misses, and unwillingness to engage with E2open which wanted to acquire AMBR at what remains a premium to AMBR’s trading price. Further, the Altai demanded that the Board form an independent committee and engage financial advisors immediately in order to sell AMBR. Altai concluded the Letter to the Board with a commitment to take action, including nominating independent directors to the Board if necessary, if the Board refuses to pursue a strategic review.  You can find the full letter here.
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Subscribers of 13D Alerts received an email alert when this letter was filed with the SEC along with the 13D filing. 

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Disclaimer:
Information provided here or in email alerts does not constitute investment advice nor an offer to sell securities. The information provided is for research purposely only and we do not take any responsibility for any loss or damage including and without limitation to any loss which may arise directly or indirectly from use of or reliance on such information. The writer of this article does not at the time of writing have any positions in AMBR, but may potentially purchase shares pending further analysis and market conditions. 

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Alcentra Capital giving in to Stilwell Value

12/11/2018

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Alcentra Capital Corporation Adopts Share Repurchase Plan

Alcentra Capital Corporation (NASDAQ: ABDC), a provider of debt financing solutions to middle-market companies, announced today that the Company has adopted a share repurchasing program. This action comes after nearly a year of pressure from 13D filer Stilwell Value, an activist fund. 

ABDC closed trading today at $6.61 per share, below the $7-$8 price range Stilwell began buying back in fall of 2017 (see original 13D filing price tables). Stilwell has been on a mission to get the company to narrow the discount to NAV that the company is trading at (as of the last 10Q, ABDC's NAV per share was ~$11 per share).
Stilwell stated in their last ABDC 13D/A:
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"We hope to work with the Issuer to reduce its share price discount to net asset value. We informed management at a meeting on January 5, 2018, and reiterated several times throughout the year, that if the Issuer does not repurchase 10% of its shares in 2018, we will aggressively seek board representation."
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​Disclaimer:
Information provided here or in email alerts does not constitute investment advice nor an offer to sell securities. The information provided is for research purposely only and we do not take any responsibility for any loss or damage including and without limitation to any loss which may arise directly or indirectly from use of or reliance on such information. The writer of this article does not at the time of writing have any positions in ABDC, but may potentially purchase shares pending further analysis and market conditions. 
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Engaged Capital vs Del Frisco's

12/6/2018

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Engaged Capital Pushes the Restaurant Group to explore strategic alternatives

Today activist fund Engaged Capital filed a 13D disclosing an approximately 9.99% stake in Del Frisco's Restaurant Group (NASDAQ: DFRG). Engaged also included a letter to the Del Frisco's board in its filing. Highlights from the letter below:
"
  • DFRG’s compelling dining concepts are undervalued by public shareholders
  • The Board’s approval of the Barteca acquisition, compounded by management’s weak operating performance, has destroyed substantial shareholder value
  • A sale of DFRG today, in whole or in parts, presents the most attractive risk-adjusted return for shareholders
"
The letter includes further analysis and peer comparisons highlighting Del Frisco's under performance. You can view the full letter here.

Del Frisco's stock price was up 16.5% on the this news. 13D Alerts subscribers received an alert this morning before market open for this filing.

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Disclaimer:
Information provided here or in email alerts does not constitute investment advice nor an offer to sell securities. The information provided is for research purposely only and we do not take any responsibility for any loss or damage including and without limitation to any loss which may arise directly or indirectly from use of or reliance on such information. The writer of this article does not at the time of writing have any positions in DFRG, but may potentially purchase shares pending further analysis and market conditions. 
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Case: Jack In the box up for sale

11/29/2018

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Jack In the Box (ticker: JACK) which has been the target of two activist investors (Jana Partners and Blue Harbour Group, both having filed 13Ds) is putting it self up for sale according to Reuters. The stock was up 6% today on the sale rumors. One analyst speculated that if JACK sells for the same multiple as Sonic fast food (sold to Arby's parent Inspire Brands a few months ago at 16x trailing EBITDA) it would result in a $115 share price, a nearly 30% premium to today's closing price of $88.54 per share. He goes on to say that this would be on the higher end of a potential sale price. 
See CNBC article here for more on the rumors.

Both Jana and Blue Harbour stated in their 13D filings (filed in February and November 2018 respectively) that they thought JACK was a undervalued or a good investment. Further they also mentioned they would be having strategic discussions with JACK board and management on ways to unlock shareholder value. It will be interesting to see how much JACK eventually gets sold for. 

Subscribers of 13D Alerts received email alerts when Jana Partners and Blue Harbour Group filed their schedule 13D filings. 

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Note that the writer of this post has a long position in JACK.
​Information provided here or in email alerts does not constitute investment advice nor an offer to sell securities. The information provided is for research purposely only and we do not take any responsibility for any loss or damage including and without limitation to any loss which may arise directly or indirectly from use of or reliance on such information.
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Do activist investors create long term value?

11/23/2018

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Subscriber question

​This question is slightly broad. You can almost think of it like “do CEO’s create long term value?” some do and some definitely don’t. It depends on many things. Generally speaking most of the actions activist investors push for are to create value and with the exception of some actions, it is to create long term value. Pushing for the below are generally good for long term value:

Changing bad management/board
  • Disposing of under-performing assets to unlock capital for the performing business/assets
  • Separating disparate companies from each other allowing them to be managed independently and to allow their performance to be measured independently
  • Urging a company to sell it self to a strategic buyer which will create a more competitive successor company
Actions that can increase risk resulting in diminished long term value are usually related to increasing debt:
  • Dividend/share-buyback (increasing debt load to pay a special dividends or large share buybacks to shareholders), there is usually no long term value creation for the company itself resulting from this action. This doesn’t mean it is a bad move. It does usually create immediate value for shareholders, whether it is through increase share price or increased dividends. A lot of times companies have room to add debt to the capital structure and pay shareholders back some of their money so the shareholders can use it for other investments to increase value in different asset (don’t forget it’s the shareholders’ capital and for a company to holding on to it is not always the best capital allocation decision) Apple is a good case for this action. That being said, if the company levers it self up too much for shareholder payouts, this can leave the company vulnerable to downturns in the economy or secular changes to it’s business.

If one is focusing on an event-driven investment strategy (waiting for the activist's actions to be executed and then exiting once the stock price has appreciated), then the question of long term value creation for the purposes of investment strategy don't apply. 
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